Thanks for the kind words, @Malkd. I did start last year to help make decisions to preserve the family portfolio, but I found that the market united my love for public policy and good ideas, and is also a way to express oneself, through conviction of the effects of a particular policy / business model. Valuepickr and portfolio threads like yours have gone a long way towards making me a better investor. My mom used to read Capital Markets, and wishes she had tools like Tijori / Screener in her early days. I don’t mind making mistakes and being wrong, but I’d rather be wrong after reading in depth rather than through laziness/negligence.
You’ve been right when I’ve expressed concerns before, and I’m sure you’re going to be right about Ingrevia.
I agree, and was having this conversation with my parents. Reliance is responsible for creating a lot of the single use plastic we use. Nestlé has been riddled with controversies since the 90s, from alleged child labour in their supply chain, to the horrifying story of baby milk powder in the African continent. I wouldn’t bet against either of them.
The problem I have with Ingrevia is that this looks to be a culture of we don’t care. Nira had the chemical leak around April 19th 2019, and was shut down following this. I read through all the exchange filings between March 1st 2019 and June 1st 2019 to see what the company’s response was. Guess what? They didn’t disclose the chemical leak, plant closure, or any comments on preventing this from happening again. To me, this is the nightmare. The plant is so far away from us that we trust them to disclose developments as we would with a pharma company, and I don’t trust them. (They also received an OAI at the same time, but that’s Pharmova’s problem) Compare the response Shilpa Medicare gave after their OAI with the lack of disclosures made by the Jubilant group. Even in the concalls following the leak, there was not a single mention, and I don’t know why the analysts present on the call chose not to take it up.
With Gajraula, the report from the government board is equally damning. They drew groundwater without permission and its now classified as over-exploited. If you read through the various breaches listed in the report, they’re numerous and across the entire plant. (I highlighted how they don’t have any fire safety measures where they’re storing hazardous waste in the thread)
They’ll throw money at the NGT, and it’ll go away for a few years, but these are cultural issues which would be deeply problematic if they were dealing with any other governmental structure but ours. With covid, we’ve also forgotten how bad pollution was in Delhi. If pollution in China and subsequent plant closures lead to huge global tailwinds in various industries, why should we be lax about the very real possibility of our own industries being crippled by similar policies? (Especially if we’re going to see a large capex cycle in the next few years with infra + steel + chemicals…)
Here’s a really nice read on how carbon pricing is changing in Europe and would place incentives on industries to import from greener sources:
My first tranche of Ingrevia was at 260, and the difference between our holdings was the allocation. I allocated heavily for the same reasons you did, that we’re unlikely to see these prices again. This made Ingrevia my largest holding at 15%. The position size knowing the regulatory concerns was the reason for unease. Wouldn’t it be the same from your side if Ingrevia was as much of your portfolio as Laurus Labs / Deepak Nitrite? There’s a world of difference between the investment thesis / quality between these two and Ingrevia. I’ve brought down the position to ~5% now, and that’ll slowly reduce with my SIP.
As I said before, you’re certainly going to be right to continue holding. It’s likely that the stock will run up significantly, and even if the plant gets shut down, perhaps the correction in the stock in 2022 will still leave it higher than current prices. I just don’t like feeling uneasy and can’t trust the management on this front.
I had a chat with Harsh, and he pointed out that if we prioritised ESG metrics above all others, we’d have a stock universe of maybe 20 companies.